Category: 1098's

Form 1098-T: Tuition Statement- Calculating Your Credit or Deduction

Guide to Tax form 1098-T: Tuition Statement

Tuition-paying students at eligible colleges or other post-secondary institutions should receive a copy of Internal Revenue Service Form 1098-T from their school each year. Eligible institutions include most colleges, universities, and vocational schools that are eligible to participate in the Department of Education’s student aid programs. This form provides information about educational expenses that may qualify the student or the student's parents or guardian, if the student is still a dependent for the tuition and fees tax deduction or education-related tax credits.

Who gets the 1098-T FORM?

Schools must send Form 1098-T to any student who paid "qualified educational expenses" in the preceding tax year. Qualified expenses include tuition, any fees that are required for enrollment, and course materials the student was required to buy from the school. If someone else pays such expenses on behalf of the student (like a parent), the student still gets "credit" for them and therefore gets the 1098-T. Schools must send the form to the student by January 31 and file a copy with the IRS by February 28.

Reporting qualified expenses

Schools can report a student's qualified expenses one of two ways: based on how much the student actually paid during the year, or based on how much the school billed the student during the year. If the school reports the amount paid, it puts that figure in Box 1 of the form. If it reports the amount billed, it does so in Box 2. (A school generally has to use the same reporting method every year. If it changes its method -- which requires IRS approval -- it puts a check mark in Box 3. This box is here primarily for the IRS's information, not the student's.)

Adjustments and scholarships

Box 4 of the form shows any adjustments the school has made to qualified expenses reported on a previous year's 1098-T. If it turns out a previous year's expenses were lower than initially reported, the student may be responsible for additional tax for that year. The student must amend that tax year in order to recapture that amount in Box 4.

Box 5 shows the amount of scholarships and grants that were paid directly to the school for the student's expenses. Scholarships and grants may reduce the amount of qualified expenses the student can use when calculating a deduction or credit.

The amount that you are eligible to use to reduce your tax bill is, in most cases, simply the amounts paid for tuition and fees minus the amount of scholarships you received. You can only receive a deduction or credit for the amount of expenses that you paid out of pocket.

If the amount in Box 5 (your scholarships) is GREATER THAN the amount in Box 1 (or Box 2, whichever is filled in on your 1098-T), then you cannot use any expenses to reduce your tax bill. You must report the excess as taxable income on your federal return. To do this within the TaxSlayer program, please go into the Federal Section >> Income >> Enter Myself >> Other Income >> Other Compensation >> Scholarships and Grants.

If the amount in Box 5 is LESS THAN the amount in Box 1 (or Box 2, whichever is filled in on your 1098-T), then you can use the expenses as a deduction or credit. Subtract Box 5 from Box 1 (or Box 2). The difference is generally the amount that was paid out of pocket and that can be reported on your return.

Box 6 shows any adjustments the school has made to scholarships and grants reported on a previous year's 1098-T. These adjustments may affect the student's tax liability for the previous year, so the student may have to file an amended return.

Other information

Schools must check Box 7 if the amount in Box 1 or 2 includes expenses for an academic term that begins in the first three months of the year following the year covered by the 1098-T. A check mark in Box 8 indicates that the student is enrolled at least half-time. A check mark in Box 9 indicates that the student is enrolled in a graduate program.